May 5, 2020 / 7:56 PM / 3 months ago

CANADA FX DEBT-Canadian dollar rallies along with stocks on easing lockdowns

 (Adds strategist quote and details throughout, updates prices)
    * Canadian dollar rises 0.4% against the greenback
    * Canada's trade deficit widens to C$1.4 billion in March
    * Price of U.S. oil increases about 20%
    * Canadian bond yields edge higher across a flatter curve

    By Fergal Smith
    TORONTO, May 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday as the easing of
coronavirus-induced lockdowns in some countries boosted investor
sentiment and the price of oil.
    Canada runs a current account deficit and is a major
exporter of oil, so the loonie tends to be sensitive to the
global flow of trade and capital.                 
    Oil is a supporting factor for the Canadian dollar, "but
mostly I think it's just the risk-on move," said Mark Chandler,
head of Canadian fixed income and currency strategy at RBC
Capital Markets.    
    Wall Street's main indexes and oil rallied on hopes for a
recovery in economic activity as some European and Asian
countries along with several U.S. states began to ease
restrictions that were put in place to contain the coronavirus
    U.S. crude oil futures        were up about 20% at $24.49 a
    The Canadian dollar          was trading 0.4% higher at
1.4025 to the greenback, or 71.30 U.S. cents. The currency,
which had been pressured in recent days by fears of a reignited
U.S.-China trade dispute, traded in a range of 1.4008 to 1.4094.
    The gain for the loonie came as official data showed that
Canada's trade deficit widened less than expected to C$1.4
billion in March from C$0.9 billion in February as both exports
and imports declined.             
    "The extent of the declines in both exports and imports was
not as pronounced as expected," said Ryan Brecht, a senior
economist at Action Economics. "However, exports and imports
should see sharp declines in April as the economy saw a plunge
in activity due to the stay-at-home measures implemented to slow
the pandemic."
    Canada will invest C$252 million to help farmers and food
processors weather the coronavirus outbreak, Prime Minister
Justin Trudeau said, but industry groups say the funding falls
far short of what is needed.                  
    Ottawa is rolling out about C$300 billion of economic
support measures, while the Bank of Canada has slashed interest
rates to 0.25%, matching a record low, and begun a large-scale
asset purchase program for the first time.
    On Monday, Bank of Canada Senior Deputy Governor Carolyn
Wilkins said the bank stood ready to adjust its asset purchases
to support a lasting recovery.             
    Canadian government bond yields edged higher across much of
a flatter curve on Tuesday, with the 2-year            up 1.8
basis points at 0.331%.
    Canada's jobs report for April is due on Friday.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and Peter
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